Fine Tune Your Network Strategy

Most distribution networks are made up of multiple facilities in a regional configuration. For companies handling import/export or regional distribution needs out of the Southeastern United States, Logistics Today's Logistics Quotient examines 105 standard metropolitan statistical areas (SMSAs) on 10 major, logistics-related measures.

The full ranking of 362 SMSAs assigns one to five stars to the markets based on how they fare on the 10 measures overall. The Boyd Company (Princeton, N.J. www.bizcosts.com) has, for the last three years, taken the top 50 SMSAs and researched the cost to own or lease a distribution facility in those cities (See box). The Southeast Region contains 17 cities that have currently or previously ranked among the national top 50.

While no single measure or cost factor typically determines a distribution site choice, each logistics network will make different demands and, therefore, place a heavier emphasis on certain factors. Operations which are heavily dependent on import/export flows or which combine a regional distribution operation with some consolidation or deconsolidation of international traffic will naturally stress ocean and air capacity.

In the Southeast Region, Memphis, Miami/Ft. Lauderdale and Atlanta all offer strong air cargo capabilities. Based on its status as a bulk commodities port, New Orleans ranks at the top of the national capabilities for ocean and inland waterway operations.

Carrying the air/ocean scenario further, Miami/Ft. Lauderdale have immediate access to an ocean port in conjunction with their strong air capacity. Atlanta has close proximity to Savannah for ocean support. Memphis would rely on inland waterways or rail intermodal to effect a connection to ocean services.

On an annual cost-of-ownership basis, at $12,719,000 per year the Boyd study indicates Savannah has the lowest overall operating cost of these five SMSAs. Memphis is slightly higher at $12,774,000, followed by Atlanta, $13,149,000. Ft. Lauderdale and Miami are somewhat higher at $15,906,000 and $16,296,000, respectively.

Georgia has a very logistics friendly environment from the perspective of overall taxes and fees applied to logistics operations, including those affecting highway moves. Boyd's research shows an effective property tax rate of $16.10 per $1,000 of valuation for Atlanta, which is nearly double the rate in Mobile, Ala., the region's low-cost city. But Atlanta is more than $9 per $1,000 lower than New Orleans, the region's high-cost venue.

While a heavy user of air cargo might rule out Mobile and New Orleans based on their air capacity, when it comes to property tax rates, Atlanta and Ft. Lauderdale are equal, $1.12 per $1,000 less than Memphis, $2.00 less than Savannah, and $2.50 less than Miami. For a company that prefers to own its facility, the wider gaps can add weight to their decision but can also provide a negotiating tool with local and state governments if other factors don't take a city completely out of consideration. Boyd's operating cost numbers don't attempt to estimate the impact of abatements, which could lower the effective rate, or additional municipal school, fire and special assessment fees that could add to the property costs.

If the Georgia venues are looking good, based on air, ocean and property taxes, how do they fare on other logistics-related factors? Work force and the presence of transportation and distribution related industry are pluses. Road conditions and interstate highways are all good, according to the rankings provided by the Logistics Quotient. Even rail access is good. But when it comes to road infrastructure and density, congestion and safety matters, both Atlanta and Savannah report some high numbers.

Congestion is also a factor in Miami, Ft. Lauderdale and Memphis, according to the data used to compile the Logistics Quotient, so a shipper making a site-selection decision may still be facing a five-way tie among these major metro areas. At this point other factors start to come into play, including proximity to sources and markets. New developments that have not yet shown up in databases can also affect choices. If Memphis was attractive because it is the home of FedEx, that company's new hub slated to open in 2009 in the Piedmont Triad area in North Carolina may influence future network planning.

Tie breakers can also be very personal. There is the story of the CEO who liked to visit the company's factory near the university his daughter attended. No statistical tool or consultant can help in swaying that site selection determination, but for the rest, consult the Southeast regional portion of the 2006-2007 Logistics Quotient.


San Francisco the Most Expensive Location, Little Rock the Least
Study compares operating costs of top logistics locations nationwide.

If you want to operate a distribution center, San Francisco is the most expensive of the top logistics markets in the United States. Little Rock, Ark. is the cheapest of the most "logistics friendly" cities as identified by Logistics Today and Expansion Management magazines. The difference in cost between the most and least expensive on an annual operating basis is around $8.7 million.

To arrive at these figures The Boyd Company (Princeton, N.J. www.bizcosts.com) modeled a 350,000 sq.-ft. distribution center with a non-exempt workforce of 150 people that serves a national distribution network via truckload shipments. Applying costs such as labor, electric power, natural gas, amortization costs (for an owned facility or lease costs for a leased facility), property and sales tax costs, shipping costs and heating and air conditioning, Boyd's "BizCosts Comparative Distribution Warehousing Operating Costs" study presents its findings for 67 major metropolitan areas. Those 67 cities were selected from the Top 50 Logistics Friendly Cities as designated by Logistics Today and Expansion Management magazines over the last three years. (Boyd included cities as they moved into the top 50 but did not drop any top-ranked cities that dropped out from prior years, accounting for the total of 67.)

Leasing the model facility will improve costs by $4,882,970 per year in the San Francisco market or $1,648,738 in Little Rock. That's a reduction of 31% over the cost of ownership in San Francisco or 16% in Little Rock. But of course there's more to site selection than just cost


How to use the Logistics Quotient
The Southeast Regional Logistics Quotient matrix provides an overall ranking of each city within the Northeast region, assigning a rank of 5 stars to the top tier, 4 stars to the next group and so on down to a 1-star rank. The Logistics Quotient also features 10 logistics-related categories with national numerical rankings on a scale from a top score of 1 down to 362 (the number of Standard Metropolitan Statistical Areas ranked). Those categories are:

  • Transportation and distribution industry—based on business and employment base providing transportation, distribution, warehousing and related services.
  • Work force—geared to existing and available logistics-related workers in the area.
  • Road infrastructure—measures factors like available lane miles per capita, interstate highway access, miles of paved roads etc.
  • Road density, congestion and safety—ranks the city on traffic volumes and delays as well as accident statistics and other factors affecting the smooth flow of traffic.
  • Road condition—draws on state performance and includes condition of highways and bridges among other measures.
  • Interstate highway—includes access to interstate highways, spending on highway construction and maintenance.
  • Taxes and fees—provides a measure of logistics-related costs, including highway and fuel taxes and related business activity taxes.
  • Railroad—offers a state-based rank of access to Class 1 and other rail services and miles of track.
  • Waterborne commerce—includes ocean port capacity as well as inland waterways.
  • Air cargo—ranks the city on its access to cargo services, including wide-body passenger service by combination carriers, international and expedited services.

2006/2007 Rating

METROPOLITAN AREA

T&D Industry Rank

Work Force Cost Rank

Road Infrastructure Rank

Road Density, Congestion and Safety Rank

Road Condition State Rank

Interstate Highways Rank

Taxes & Fees State Rank

Railroad Rank

Waterborne Commerce Rank

Air Cargo Rank

*****

Atlanta-Sandy Springs-Marietta, Ga.

7

66

289

345

4

12

3

34

95

8

*****

Baton Rouge, La.

57

41

281

340

280

52

45

102

4

115

*****

Birmingham-Hoover, Ala.

48

74

190

238

210

23

34

24

38

67

*****

Charleston-North Charleston, S.C.

58

17

334

211

163

120

21

63

76

117

*****

Charlotte-Gastonia-Concord, N.C.-S.C.

34

140

301

265

270

52

158

34

112

26

*****

Chattanooga, Tenn.-Ga.

85

51

269

206

50

52

29

63

57

107

*****

Columbia, S.C.

70

12

334

118

163

36

21

225

108

48

*****

Jacksonville, Fla.

33

30

21

295

29

52

188

63

40

51

*****

Knoxville, Tenn.

70

112

225

337

73

36

57

102

64

73

*****

Little Rock-North Little Rock, Ark.

53

23

231

81

158

23

136

34

44

72

*****

Memphis, Tenn.-Miss.-Ark.

18

34

275

319

155

52

99

34

27

2

*****

Miami-Fort Lauderdale-Miami Beach, Fla.

4

3

21

357

29

36

188

151

47

4

*****

Mobile, Ala.

97

79

190

222

210

52

34

24

22

93

*****

Nashville-Davidson-Murfreesboro, Tenn.

36

76

225

231

73

36

57

102

36

40

*****

New Orleans-Metairie-Kenner, La.

30

36

281

276

280

52

45

17

1

48

*****

Orlando, Fla.

35

94

21

340

29

157

188

151

73

22

*****

Richmond, Va.

43

124

175

102

172

15

90

225

55

51

*****

Savannah, Ga.

84

71

289

244

4

52

3

63

75

134

*****

Tampa-St. Petersburg-Clearwater, Fla.

31

9

21

362

29

23

188

310

19

27

*****

Norfolk-Newport News, Va.-N.C.

38

64

201

247

185

36

108

34

35

62

*****

Washington-Arlington, D.C.-Md.-Va.-W.Va.

16

48

175

305

222

9

124

63

24

23

****

Augusta-Richmond County, Ga.-S.C.

139

183

309

235

64

120

18

151

111

166

****

Cape Coral-Fort Myers, Fla.

138

166

21

359

29

157

188

310

19

83

****

Fayetteville-Springdale-Rogers, Ark.-Mo.

74

22

235

247

187

288

132

151

117

119

****

Fort Smith, Ark.-Okla.

119

98

271

138

208

120

105

34

72

166

****

Greensboro-High Point, N.C.

61

109

350

124

134

81

111

151

225

55

****

Greensville, S.C.

102

203

334

313

163

23

21

102

106

92

****

Huntsville, Ala.

180

173

190

278

210

120

34

151

50

76

****

Jackson, Miss.

89

80

305

213

181

52

100

225

41

80

****

Lafayette, La.

127

159

281

336

280

81

45

151

83

134

****

Lake Charles, La.

160

143

281

94

280

120

45

102

37

217

****

Macon, Ga.

201

296

289

88

4

52

3

151

116

166

****

Montgomery, Ala.

153

156

190

313

210

81

34

151

103

134

****

Pensacola-Ferry Pass-Brent, Fla.

150

168

21

346

29

120

188

225

70

102

****

Raleigh-Cary, N.C.

64

105

350

310

134

52

111

225

133

42

****

Roanoke, Va.

134

198

175

251

172

120

90

225

118

82

****

Sarasota-Bradenton-Venice, Fla.

147

176

21

361

29

120

188

225

70

102

****

Shreveport-Bossier City, La.

136

157

281

98

280

52

45

151

98

87

****

Spartanburg, S.C.

129

136

334

167

163

81

21

225

225

107

****

Tuscaloosa, Ala.

185

169

190

291

210

52

34

34

225

233

****

Winston-Salem, N.C.

115

212

350

139

134

81

111

102

126

143

***

Albany, Ga.

227

238

289

311

4

288

3

151

120

166

***

Alexandria, La.

245

237

281

27

280

157

45

151

225

217

***

Asheville, N.C.

144

142

350

79

134

52

111

310

153

154

***

Deltona-Daytona Beach-Ormond Beach, Fla.

198

232

21

339

29

81

188

225

225

193

***

Dothan, Ala.

192

164

190

145

210

288

34

34

93

233

***

Durham, N.C.

166

113

350

268

134

81

188

225

225

193

***

Fayetteville, N.C.

190

174

350

333

134

157

111

63

150

166

***

Gulfport-Biloxi, Miss.

164

133

305

316

181

120

100

102

33

263

***

Hickory-Morganton-Lenoir, N.C.

122

203

350

274

134

157

111

102

148

127

***

Kingsport-Bristol, Tenn.-Va.

178

186

220

48

104

120

89

225

225

154

***

Lakeland-Winter Haven, Fla.

91

146

21

258

29

157

188

225

225

143

***

Lynchburg, Va.

169

152

175

83

172

288

90

225

225

193

***

Monroe, La.

204

158

281

329

280

157

45

63

101

217

***

Palm Bay-Melbourne-Titusville, Fla.

87

73

21

353

29

157

188

310

225

119

***

Port St. Lucie-Fort Pierce, Fla.

178

257

21

196

29

157

188

151

225

166

***

Tallahassee, Fla.

268

324

21

354

29

157

188

225

58

111

***

Wilmington, N.C.

150

145

350

343

134

157

111

151

53

193

**

Anderson, S.C.

296

326

334

125

163

157

21

102

225

320

**

Blacksburg-Christianburg-Radford, Va.

316

353

175

220

172

157

90

225

225

193

**

Brunswick, Ga.

327

268

289

195

4

157

3

225

225

320

**

Charlottesville, Va.

268

335

175

201

172

157

90

151

225

217

**

Cleveland, Tenn.

318

274

225

165

73

157

57

225

225

298

**

Columbus, Ga.-Ala.

258

351

279

301

51

280

19

151

89

193

**

Dalton, Ga.

191

58

289

317

4

157

3

225

225

320

**

Decatur, Ala.

253

225

190

323

210

157

34

225

225

298

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